Appendix 74
SEBI (EMPLOYEES STOCK OPTION SCHEME AND EMPLOYEES STOCK PURCHASE SCHEME) GUIDELINES, 1999 (W.E.F. 19‑6‑1999)
[Issued by SEBI vide PR 135/99, dated 18‑6‑1999]
1. Short title and
commencement
1.1 These Guidelines have been issued by
Securities and Exchange Board of India under section II of the Securities and
Exchange Board of India Act, 1992.
1.2 These Guidelines may be called the
Securities and Exchange Board of India (Employee Stock Option Scheme and
Employee Stock Purchase Scheme), Guidelines, 1999.
2. Definitions
2.1 In these Guidelines, unless otherwise defined:
(1) "employee" means
(a) a permanent employee of the company
working in India or out of India; or
(b) a director of the company, whether a
whole time director or not; or
(c) an employee as defined in sub‑clauses
(a) or (b) of a subsidiary, in India or out of India, or of a holding company
of the company.
(2) "employee compensation" means
the total cost incurred by the company towards employee compensation including
basic salary, dearness allowance, other allowances, bonus and commissions
including the value of all perquisites provided, but does not include:
(a) The fair value of the option granted
under an Employee Stock Option Scheme; and
(b) The discount at which shares are issued
under an Employee Stock Purchase Scheme.
(3) "Employee stock option scheme
(ESOS)" means a scheme under which a company grants option to employees.
(4) "Employee stock purchase scheme
(ESPS)" means a scheme under which the company offers shares to employees
as part of a public issue or otherwise.
(5) "Exercise" means making of an
application by the employee to the company for issue of shares against option
vested in him in pursuance of the ESOS.
(6) "Exercise period" means the
time period after vesting within which the employee should exercise his right
to apply for shares against the option vested in him in pursuance of the ESOS.
(7) "Exercise price" means the
price payable by the employee for exercising the option granted to him in
pursuance of ESOS.
(8) "Grant" means issue of option
to employees under ESOS.
(9) "Independent director" means a
director of the company, not being a whole time director and who is neither a
promoter nor belongs to the promoter group.
(10) "Market
price" of a share on a given date means the closing price of the shares on
that date on the stock exchange on which the shares of the company are listed.
[Explanation: If
the shares are listed on more than one stock exchange, but quoted only on one
stock exchange on the given date, then the price on that stock exchange should
be considered. If the share price is quoted on more than one stock exchange,
then the stock exchange where there is highest trading volume on that date
should be considered. If share price is not quoted on the given date, then the
share price on the next trading day should be considered.]
(11) "Option" means a right but not
an obligation granted to an employee in pursuance of ESOS to apply for shares
of the company at a pre‑determined price.
(12) "Promoter" means;
(a) The person or persons who are in over‑all
control of the company;
(b) The person or persons who are
instrumental in the formation of the company or programme pursuant to which the
shares were offered to the public;
(c) The persons or persons named in the
offer document as promoter(s).
Provided that a
director or officer of the company, if they are acting as such only in their
professional capacity will not be deemed to be a promoter.
[Explanation:
Where a promoter of a company is a body corporate, the promoters of that body
corporate shall also be deemed to be promoters of the company.]
(13) "Promoter group" means
(a) An immediate relative of the promoter
(i.e., spouse of that person, or any parent, brother, sister or child of the
person or of the spouse);
(b) Persons whose shareholding is aggregated
for the purpose of disclosing in the offer document "shareholding of the
promoter group".
(14) "Share" means equity shares and
securities convertible into equity shares and shall include American Depository
Receipts (ADRs), Global Depository Receipts (GDRs) or other depository receipts
representing underlying equity shares or securities convertible into equity
shares.
(15) "Vesting" means the process by
which the employee is given the right to apply for shares of the company
against the option granted to him in pursuance of ESOS.
(16) "Vesting period" means the
period during which the vesting of the option granted to the employee in
pursuance of ESOS take place.
2.2 All other expressions unless defined
herein shall have the same meaning as have been assigned to them under the
Securities and Exchange Board of India Act, 1992, or the Securities Contracts
(Regulation) Act, 1956 or the Companies Act, 1956, SEBI (Disclosure and Investor
Protection) Guidelines, or any statutory modification or re‑enactment
thereof, as the case may be.
3. Applicability
3.1 These Guidelines shall apply to any
company whose shares are listed on any recognised stock exchange in India.
4. Eligibility to
participate in ESOS
4.1 An employee shall be eligible to participate in ESOS of the
company.
4.2 An employee who is promoter or belongs
to the promoter group shall not be eligible to participate in the ESOS.
4.3 A director who either by himself or
through his relative or through any body corporate, directly or indirectly
holds more than 10 per cent of the outstanding equity shares of the company
shall not be eligible to participate in the ESOS.
5. Compensation Committee
5.1 No ESOS shall be offered unless the
company constitutes a Compensation Committee for administration and
superintendence of the ESOS.
5.2 The Compensation Committee shall be a
Committee of the Board of Directors consisting of a majority of independent
directors.
5.3 The Compensation Committee shall, inter
alia formulate the detailed terms and conditions of the ESOS including:
(a) The quantum of option to be granted
under an ESOS per employee and in aggregate.
(b) The conditions under which option vested
in employees may lapse in case of termination of employment for misconduct;
(c) The exercise period within which the
employee should exercise the option and that option would lapse on failure to
exercise the option within the exercise period;
(d) The specified time period within which
the employee shall exercise the vested options in the event of termination or
resignation of an employee.
(e) The right of an employee to exercise all
the options vested in him at one time or at various points of time within the
exercise period;
(f) The procedure for making fair and
reasonable adjustment to the number of options and to the exercise price in
case of rights issues, bonus issues and other corporate actions;
(g) The grant, vest and exercise of option
in case of employees who are on long leave; and
(h) The procedure for cashless exercise of
options.
5.4 The Compensation Committee shall frame
suitable policies and systems to ensure that there is no violation of:
(a) Securities and Exchange Board of India
(Insider Trading) Regulations, 1992; and
(b) Securities and Exchange Board of India
(Prohibition of Fraudulent and Unfair Trade Practices relating to the
Securities Market) Regulations 1995, by any employee.
6. Shareholder approval
6.1 No ESOS can be offered to employees of a
company unless the shareholders of the company approve ESOS by passing a
special resolution in the general meeting.
6.2 The explanatory statement to the notice
and the resolution proposed to be passed in general meeting for ESOS shall, inter alia, contain the following
information:
(a) the total number of options to be granted;
(b) identification of classes of employees
entitled to participate in the ESOS;
(c) requirements of vesting and period of vesting;
(d) maximum period (subject to clause 9.1)
within which the options shall be vested;
(e) exercise price or pricing formula;
(f) exercise period and process of exercise;
(g) the appraisal process for determining
the eligibility of employees to the ESOS;
(h) maximum number of options to be issued
per employee and in aggregate;
(i) a statement to the effect that the
company shall conform to the accounting policies specified in clause 13.1.
6.3 Approval of shareholders by way of
separate resolution in the general meeting shall be obtained by the company in
case of‑,
(a) grant of option to employees of
subsidiary or holding company and,
(b) Grant of option to identified employees,
during any one year, equal to or exceeding 1% of the issued capital (excluding
outstanding warrants and conversions) of the company at the time of grant of
option.
7. Variation of terms of
ESOS
7.1 The company shall not vary the terms of
the ESOS in any manner which may be detrimental to the interests of the
employees.
7.2 The company may by special resolution in
a general meeting vary the terms of ESOS offered pursuant to an earlier
resolution of a general body but not yet exercised by the employee provided
such variation is not prejudicial to the interests of the option holders.
7.3 The provisions of clause 6.3 shall apply
to such variation of terms as they do to the original grant of option.
7.4 The notice for passing special
resolution for variation of terms of ESOS shall disclose full details of the
variation, the rationale there for, and the details of the employees who are
beneficiary of such variation.
8. Pricing
8.1 The companies granting option to its
employees pursuant to ESOS will have the freedom to determine the exercise
price subject to conforming to the accounting policies specified in clause 13.1.
9. Lock‑in period
and rights of the option‑holder
9.1 There shall be a minimum period of one
year between the grant of options and vesting of option.
9.2 The company shall have the freedom to
specify the lock‑in period for the shares issued pursuant to exercise of
option.
9.3 The employee shall not have right to
receive any dividend or to vote or in any manner enjoy the benefits of a
shareholder in respect of option granted to him, till shares are issued on
exercise of option.
10. Consequence of failure
to exercise option
10.1 The amount payable by the employee, if any, at the time of
grant of option:
(a) may be forfeited by the company if the
option is not exercised by the employee within the exercise period; or
(b) the amount may be refunded to the employee
if the option are not vested due to non fulfillment of condition relating to
vesting of option as per the ESOS.
11. Non‑transferability
of option
11.1 Option granted to an employee shall not be transferable to any
person.
11.2
(a) No person other than the employee to
whom the option is granted shall be entitled to exercise the option.
(b) Under the cashless system of exercises,
the company may itself fund or permit the enameled stock brokers to fund the
payment of exercise price which shall be adjusted against the sale proceeds of
some or all the shares, subject to the provision of the Companies Act.
11.3 The option granted to the employee shall
not be pledged, hypothecated, mortgaged or otherwise alienated in any other
manner.
11.4 In the event of the death of employee
while in employment, all the option granted to him till such date shall vest in
the legal heirs or nominees of the deceased employee.
11.5 In case the employee suffers a permanent
incapacity while in employment, all the option granted to him as on the date of
permanent incapacitation, shall vest in him on that day.
11.6 In the event of resignation or termination
of the employee, all options not vested as on that day shall expire. However,
the employee shall, subject to the provision of clause 5.3(b) shall be entitled to retain all the vested options.
12. Disclosure in the
Directors' Report
12.1 The Board of Directors, shall, inter alia disclose either in the
Directors Report or in the annexure to the Director's Report, the following
details of the ESOS:
(a) options granted;
(b) the pricing formula;
(c) options vested;
(d) options exercised;
(e) the total number of shares arising as a
result of exercise of option;
(f) options lapsed;
(g) variation of terms of options;
(h) money realised by exercise of options;
(i) total number of options in force;
(j) employee‑wise details of options
granted to:-
(i) senior managerial personnel;
(ii) any other employee who receives a grant
in any one year of option amounting to 5% or more of option granted during that
year.
(iii) identified employees who were granted
option, during any one year, equal to or exceeding 1% of the issued capital
(excluding outstanding warrants and conversions) of the company at the time of
grant;
(k) diluted Earnings Per Share (EPS)
pursuant to issue of shares on exercise of option calculated in accordance with
International Accounting Standard (IAS) 33.
13. Accounting Policies
13.1 Every company that has passed a resolution
for an ESOS under clause 6.1 of these guidelines shall comply with the
accounting policies specified in Schedule 1.
14. Certificate from
Auditors
14.1 In the case of every company that has
passed a resolution for an ESOS under clause 6.1 of these guidelines, the Board
of Directors shall at each annual general meeting place before the shareholders
a certificate from the auditors of the company that the scheme has been
implemented in accordance with these guidelines and in accordance with the
resolution of the company in the general meeting.
15. Options outstanding at
Public Issue
15.1 The provisions of the Securities and
Exchange Board of India (Disclosure and Investor Protection) Guidelines
prohibiting initial public offering by companies having outstanding warrants
and financial instruments shall not be applicable in case of outstanding option
granted to employees in pursuance of ESOS.
15.2 If any option is outstanding at the time
of an initial public offering by a company, the promoters' contribution shall
be calculated with reference to the enlarged capital which would arise on
exercise of all vested options.
15.3 If any options granted to employees in
pursuance of ESOS are outstanding at the time of initial public offering, the
offer document of the company shall disclose all the information specified in
clause 12.1
16. Eligibility to
participate in ESPS
16.1 An employee shall be eligible to participate in the ESPS.
16.2 An employee who is a promoter or belongs
to the promoter group shall not be eligible to participate in the ESPS.
16.3 A director who either by himself or
through his relatives or through any body corporate, directly or indirectly
holds more than 10% of the outstanding equity shares of the company shall not
be eligible to participate in the ESPS.
17. Shareholder Approval
17.1 No ESPS shall be offered to employees of
the company unless the shareholders of the company approve ESPS by passing
special resolution in the meeting of the general body of the shareholders.
17.2 The explanatory statement to the notice shall specify:
(a) the price of the shares and also the
number of shares to be offered to each employee,
(b) the appraisal process for determining
the eligibility of employee for ESPS.
17.3 The number of shares offered may be
different for different categories of employees.
17.4 The special resolution shall state that
the company shall conform to the accounting policies specified in clause 19.2
18. Pricing and Lock‑in
18.1 The company shall have the freedom to
determine price of shares to be issued under an ESPS, provided they conform to
the provisions of clause 19.2.
18.2 Shares issued under an ESPS shall be
locked‑in for a minimum period of one year from the date of allotment.
18.3 If the ESPS is part of a public issue and
the shares are issued to employees at the same price as in the public issue,
the shares issued to employee pursuant to ESPS shall not be subject to any lock‑in.
19. Disclosure and
Accounting Policies
19.1 The Directors' Report or Annexure thereto
shall contain, inter alia, the
following disclosures:
(a) the details of the number of shares
issued in ESPS;
(b) the price at which such shares are
issued;
(c) employee‑wise details of the
shares issued to:
(i) senior managerial personnel;
(ii) any other employee who is issued shares
in any one year amounting to 5% or more shares issued during that year;
(iii) identified employees who were issued
shares during any one year equal to or exceeding 1% of the issued capital of
the company at the time of issuance;
(d) diluted Earning Per Share (EPS) pursuant
to issuance of shares under ESPS; and
(e) consideration received against the
issuance of shares.
19.2 Every company that has passed a resolution
for an ESPS under clause 17.1 of these guidelines shall comply with the
accounting policies specified in Schedule II.
20. Preferential Allotment
20.1 Nothing in these guidelines shall apply to
shares issued to employees in compliance with the Securities and Exchange Board
of India Guidelines on Preferential Allotment.
21. Part D of Clarification
XIV of DIP Guidelines
21.1 Part D of the Clarification XIV dated
March 1, 1996, on the SEBI (Disclosure and Investor Protection) Guidelines
shall not be applicable in case of ESOS and ESPS.
22. Listing
22.1 In case of listed companies, the shares
arising pursuant to an ESOS and shares issued under an ESPS, shall be eligible
for listing in any recognised stock exchange only if such schemes (i.e., ESOS or ESPS) are in accordance
with these Guidelines.
23. Commencement of the
Guidelines
23.1 These guidelines shall come into force w.e.f. 19th June, 1999.
(Clause 13.1)
Accounting Policies for ESOS
(a) In respect of options granted during any
accounting period, the accounting value of the options shall be treated as
another form of employee compensation in the financial statements of the
company.
(b) The accounting value of options shall be
equal to the aggregate, over all employee stock options granted during the
accounting period, of the fair value of the option.
For this purpose:
1. Fair value means the option discount,
or, if the company so chooses, the value of the option using the Black Scholes
formula or other similar valuation method.
2. Option discount means the excess of the
market price of the share at the date of grant of the option under ESOS over
the exercise price of the option (including upfront payment, if any).
(c) Where the accounting value is accounted
for as employee compensation in accordance with ‘b’, the amount shall be
amortised on a straight‑line basis over the vesting period.
(d) When an unvested option lapses by virtue
of the employee not conforming to the vesting conditions after the accounting
value of the option has already been accounted for as employee compensation,
this accounting treatment shall be reversed by a credit to employee
compensation expense equal to the amortized portion of the accounting value of
the lapsed options and a credit to deferred employee compensation expense equal
to the unamortized portion.
(e) When a vested option lapses on expiry of
the exercise period, after the fair value of the option has already been
accounted for as employee compensation, this accounting treatment shall be
reversed by a credit to employee compensation expense.
(f) The accounting treatment specified above
can be illustrated by the following numerical example:
Suppose a company grants 500
options on 1‑4‑1999 at Rs. 40 when the market price is Rs. 160, the
vesting period is two and a half years, the maximum exercise period is one
year. Also suppose that 150 unvested options lapse in 1‑5‑2001, 300
options are exercised on 30‑6‑2002 and 50 vested options lapse at
the end of the exercise period. The accounting value of the option being:
500 x (160‑40) = 500 x
120 = 60,000.
The accounting entries would
be as follows:
|
1-4-1999 |
Deferred Employee Compensation Expense Employee Stock Options Outstanding (Grant of 500 options at a discount of Rs. 120
each) |
60,000 |
60,000 |
|
31-3-2000 |
Employee Compensation Expense Deferred Employee Compensation Expense (Amortisation of the deferred compensation over
two and a half-years on straight-line basis) |
24,000 |
24,000 |
|
31-3-2001 |
Employee Compensation Expense Deferred Employee Compensation Expense (Amortisation of the deferred compensation over
two and a half-years on straight-line basis) |
24,000 |
24,000 |
|
1-5-2001 |
Employee Stock Options Outstanding Employee Compensation Expense Deferred Employee Compensation Expense (Reversal of compensation accounting on lapse of
150 unvested options) |
18,000 |
14,400 3,600 |
|
31-3-2002 |
Employee Compensation Expense Deferred Employee Compensation Expense (Amortisation of the deferred compensation over
two and a half-years on straight-line basis) |
8,400 |
8,400 |
|
30-6-2002 |
Cash Employee Stock Options Outstanding Paid-Up Equity Capital Share Premium Account (Exercise of 300 options at an exercise price of
Rs. 40 each and an accounting value of Rs. 120 each) |
12,000 36,000 |
3,000 45,000 |
|
1‑10‑2002 |
Employee Stock Options Outstanding Employee Compensation Expense (Reversal of compensation accounting on lapse of
50 vested options at the end of exercise period) |
6,000 |
6,000 |
The T‑Accounts for
Employee Stock Options Outstanding and Deferred Employee Compensation Expense
would be as follows:
|
1-5-2001 |
EmployeeCompensation/Deferred Compensation |
18,000 |
1-4-1999 |
Deferred Compensation |
60,000 |
|
30-6-2002 |
Paid-Up Capital/Share Prem- ium |
36,000 |
|
|
|
|
1-10-2002 |
Employee Compensation |
6,000 60,000 |
|
|
60,000 |
|
1-4-1999 |
ESOS Outstanding |
60,000 |
31-3-2000 |
Employee Compensation |
24,000 |
|
|
|
|
31-3-2001 |
Employee Compensation |
24,000 |
|
|
|
|
1-5-2001 |
ESOS Outstanding |
3,600 |
|
|
|
|
31-3-2002 |
Employee Compensation |
8,400 |
|
|
|
60,000 |
|
|
60,000 |
Employee Stock
Options Outstanding will appear in the Balance Sheet as part of Net Worth or
Shareholders' Equity. Deferred Employee Compensation will appear in the Balance
Sheet as a negative item as part of Net Worth or Shareholders' Equity.
SCHEDULE II
(Clause 19.2)
(a) In respect of shares issued under an
ESPS during any accounting period, the accounting value of the shares so issued
shall be treated as another form of employee compensation in the financial
statements of the company.
(b) The accounting value of shares issued
under ESPS shall be equal to the aggregate of price discount over all shares
issued under ESPS during any accounting period;
For this purpose
:
Price discount means the
excess of the market price of the shares at the date of issue over the price at
which they are issued under the ESPS.
(c) The accounting treatment prescribed
above can be illustrated by the following numerical
example: -
Suppose a company issues 500
shares on 1‑4‑1999 under an ESPS at Rs. 40 when the market price is
Rs. 160. The accounting value of the shares being:
500 x (160‑40) = 500 x 120 = 60,000
The accounting
entry would be as follows :
|
1-4-1999 |
Cash Employee Compensation Expense Paid-UP Equity Capital Share Premium Account (Issue of 500 shares under ESPS at a price of Rs.
40 each when market price is Rs. 160) |
20,000 60,000 |
5,000 75,000 |
GOVERNMENT DECIDES TO EXTEND EMPLOYEES STOCK OPTION TO ALL COMPANIES
ENGAGED IN ‘IT SOFTWARE' AND 'IT SERVICES'
[Press Note Issued by PIB on 16‑9‑1998]
The Government has decided
to extend the facility for issue of ADR/6DR linked stock option to all
companies engaged in the IT Software and IT Services as defined in the Gazette
Notification dated 25th July, 1998. It may be recalled that the Government had
decided in June 1998 to facilitate issue of GDR/ADR linked stock options to its
employees by companies engaged in manufacture or production of Software. At
that time it was decided that such companies should have a turn‑over of
not less than 80 per cent from Software activities. This condition would
continue to be applicable. As per the definition in the Gazette Notification
"IT Software" means any representation of instructions, data, sound
or image, including source code and object code, recorded in a machine readable
form, and capable of being manipulated or providing interactively to a user, by
means of an automatic data processing machine, falling under heading 'IT
Products', but does not include non‑IT products', 'IT service' is defined
as any service which results from the use of any software over a system of IT
products for realising value addition. ne term 'IT Industry' shall cover
development, production and services related to IT Products. The term 'IT
Software' shall be substituted in place of 'Computer Software' in all
notifications. The change has been done in view of the recommendations made in
the Information Technology Action Plan of the Prime Minister's National Task
Force on Information Technology and Software Development.
(2)
GUIDELINES FOR ISSUE OF ADR/GDR LINKED EMPLOYEES STOCK OPTIONS BY THE
INDIAN COMPANIES ENGAGED IN INFORMATION TECHNOLOGY SOFTWARE AND INFORMATION
TECHNOLOGY SERVICES‑EXPANSION IN THE SCOPE TO COVER EMPLOYEES OF
SUBSIDIARY COMPANIES
[Press Release, dated 16‑6‑2000]
Guidelines by
way of a press note were issued on June 23, 1998, containing operational
parameters and modalities for issue of ADR/GDR linked stock options to its
employees by the Indian software companies. Revision/modifications to expand
the scope of application to the Indian companies engaged in information
technology software and information technology services had been listed on
September 16, 1998. Enabling amendment notification operating the facility for
ADR/GDR linked employees stock options had been issued by the Government on
November 10, 1999, under the "Scheme for issue of Foreign Currency
Convertible Bonds and Ordinary Shares (Through Depository Receipts
Mechanism)".
2. The Government has been considering
expansion in the coverage of employees who would be entitled to the ESOPs in
line with the SEBI guidelines on ESOPs which covers employees of a subsidiary
company for the purposes of ESOPs.
3. Keeping in view the essential features
of the relationship between the parent company and subsidiaries, viz.,
interchangeability of the employees between the parent and subsidiary
companies, inter‑linkage of the parent and subsidiary companies and
complementarily of the functions between the two, it has since been decided to
expand the facility for issue of ADR/GDR linked stock options to include
employees of eligible subsidiary companies of the parent company, under the
scheme. Accordingly, Indian companies engaged in the IT software and IT
services, would be entitled to issue ADR/GDR linked stock options to the
permanent employees (including Indian and overseas working directors) of its
subsidiary companies incorporated in India or out of India and engaged in
information technology software and information technology services subject to
the eligibility criteria and other parameters prescribed in the press note
dated June 23, 1998 and September 16, 1998.
4. These guidelines will come into force with immediate effect.
(Sd.) G.S. Dutt,
Joint Secretary to the
Government of India
[F. No. 17/1/2000‑NRI]
[Issued by the Government of India, Ministry of Finance, Department of Economic Affairs (Investment Division), PIB Pren Release, New Delhi, dated 16th June, 2000.]
(3)
FURTHER LIBERALISATION IN THE GUIDELINES FOR ISSUE OF ADR/GDR LINKED
EMPLOYEES STOCK OPTIONS BY THE INDIAN COMPANIES
Guidelines by way of press
note were issued on 23 June, 1998 containing operational parameters and
modalities for issue of ADR/GDR linked stock options to its employees by the
Indian Software Companies, revisionist modifications to expand the scope of
application to the Indian companies engaged in information technology software
and information technology services has been issued on September 16, 1998.
These guidelines were further modified by the Government on June 16, 2000 expanding
the coverage of employees who would be entitled to the ESOPs in line with SEBI
guidelines in ESOPs, which include employees of a subsidiary company for the
purposes of ESOPs. Enabling amendment notification operating the facility for
ADR/GDR linked employees stock options had been issued by Government on
November 10, 1999 under the Scheme for issue of Foreign Currency Convertible
Bands and Ordinary Shares (through Depository Receipts Mechanism) Schemes.
2. Guidelines were issued on the 23 March,
2000 liberalizing the norms for overseas business acquisition by Man companies
in terms of which:
(i) the norms for acquisition of overseas
companies was extended to information technology and entertainment software,
pharmaceuticals, bio‑technology and any other activity within the
knowledge based sector as notified by the Government from time to time; and
(ii) in the case of a multi product
diversified company, not conforming to the eligibility criteria of 80% of the
turnover from the sectors/areas mentioned above, the liberalised norms would be
applicable if they have an average annual export earnings of Rs. 100 crores in
the three previous financial years in these sectors/areas.
3. It has been decided to extend the
liberalised norms as mentioned in para 2 above in respect of the issue of
ADR/GDR linked employee stock options as well. Ibis would imply that:
(I) The companies in the following knowledge
based sectors would be eligible to issue ADR/GDR linked ESOPs with a view to
enable retaining their highly skilled personnel;
(i) Information Technology (as defined in
the recommendation No. 19(a) and (b) of gazette notification dated 25‑7‑1999
issued by the Planning Commission) and entertainment software.
(ii) Pharmaceuticals.
(iii) Bio‑technology.
(iv) Any other activities within the knowledge
based sector as notified by the Government from time to time.
(II) The liberalised norms would also be
available to multi product diversified companies which do not conform to the
criteria of 80% of its turnover from the sectors mentioned in para 3(1) above,
in case they fulfill the condition of average annual export earnings of Rs. 100
crores from these sectors in the three previous financial years.
4. These guidelines will come into force with immediate effect.
[Press Note reference F.No. 17/1/2000‑NRI, issued by Ministry of Finance, Department of Economic Affairs, dated 15 September, 2000]